DETROIT -- Ford Motor Co. is bringing a second supplier of steel frames for the F-150 on board to ease a supply shortage that has slowed production for months, a person with knowledge of the matter told Automotive News.
The move resolves a longstanding situation that has hindered Ford’s ability to rebuild inventories of the highly profitable truck, which was redesigned for the 2015 model year with a lighter, aluminum body. Ford has been shipping frames hundreds of miles from Kentucky to Michigan and Missouri in small batches by truck, rather than via train as it normally would, to keep its F-150 assembly lines running.
The new supplier is Tower International, of Livonia, Mich., the source said. Tower already builds body structures for the F-series and several other Ford models, according to regulatory filings.
Tower, in its second-quarter earnings report last week, said it received “a major follow-on new business award” worth $140 million in annual revenue, without naming the customer. The new business is likely the F-150, Richard Kwas, an analyst with Wells Fargo, said in a report today.
A Tower spokesman would not confirm whether Ford is the customer referenced in the earnings report.
Tower posted numerous job openings last week at its plant in Bellevue, Ohio. The plant formerly made frames for the Ford Ranger pickup and Econoline vans. In June, the Ohio Tax Credit Authority approved a seven-year tax credit for a project at the Bellevue plant that’s expected to create 138 full-time jobs.
A story last month in the Sandusky Register said Tower was adding two assembly lines to produce “a high-tech frame for one of the big North American auto manufacturers” at the Bellevue plant, one at the end of September and the other next April. The story did not name the automaker. It said about 70 people already work at the plant and that the new lines would use 364 robots to help build the frames.
Ford’s decision to source F-150 frames from Tower was first reported this afternoon by The Wall Street Journal, which said Tower would begin supplying them in October.
Tower investments
Tower told investors that the new business award would generate about $5 million in revenue this year and $75 million to $100 million in 2016 before reaching the full $140 million in 2017. The company said it would have to make about $30 million in upfront investment to prepare for the work. Tower reported $2.1 billion in revenue last year. Ford was its largest customer, accounting for 22 percent of its business.
Automotive News first reported the frame shortage in May, after Ford canceled overtime shifts and shortened some regular production shifts at the F-150 factories in Dearborn, Mich., and Claycomo, Mo. Ford has refused to discuss or even confirm the shortage.
“We anticipate having full availability of F-150 by the end of the third quarter,” Ford said in a statement today. “We are at full production now, we are building stock at dealers, and we continue to roll out additional derivatives. As with all vehicle launches, we are working closely with our suppliers to meet customer demand for the truck.”
Ford currently gets the F-150’s high-strength steel frames from a plant in Elizabethtown, Ky., operated by Mexico-based Metalsa S.A. Analysts said Ford divided its F-series frame business between Metalsa and Magna International, with Metalsa handling the F-150 and Magna taking the Super Duty. Metalsa bought the plant from Dana Corp. in 2010.
Addressing bottlenecks
Workers told Automotive News that Ford had sent a team of employees to the Metalsa plant in Kentucky to take care of the production bottlenecks and that it was potentially seeking a second supplier.
“Whenever you have launches, you have issues that you have to deal with in the supply base,” Ford CFO Bob Shanks said June 5 when questioned about the frame shortage during a conference call with analysts. “We’re always working closely with suppliers if there’s an issue to sort it out. If that were the case, that’s what we’d be doing.”
Despite lower F-series sales in the first half of the year, Ford posted record North American profits in the second quarter as transaction prices for the F-150 and other redesigned vehicles surged.
